RELATED ARTICLES

Share this article

The situation has become much more relevant because a rising numbers of homeowners are taking out a standard variable rate mortgage.

In the past, few people had an SVR loan because the interest rate is usually much higher than lenders' 'special' deals, such as a fixed or tracker product.

But the number has risen sharply over the last year as the mortgage meltdown has left people with no choice.

For example, other deals are so expensive due to the high fees of up to £5,000 to take them out that they decide to move for free onto SVR.

The Bank of England is widely tipped to slash rates, with some experts predicting they could fall as low as one per cent next year.

They are expected to fall as much as 0.75 percentage points next Thursday, the biggest-ever cut by the Bank's monetary policy committee.

The consultancy Capital Economics said there is 'clear scope for an unusually large move' next week due to the worsening economic outlook.

But for many borrowers with a SVR loan, the Bank's base rate is irrelevant if their mortgage rate does not fall.

David Hollingworth, from the mortgage advisers London & Country, said: 'Many borrowers are seeing absolutely no benefit when the Bank of England is taking action to ease the situation. They'll be saying to themselves: 'What's the point?'

It comes after a top Bank of England official admitted it has 'limited' power to ease the cost of borrowing for struggling homeowners.

This is because the Bank's rate is falling, but the rate at which banks lend money to each other, known as Libor, remains stubbornly high.

It has dropped from 6.3 per cent at the beginning of the month to 5.88 per cent yesterday, but is still far above the Bank's base rate of 4.5 per cent.